Modeling Airline Choice Behavior Based on Observed and Latent Variables Using Structural Equation Modeling and Multinomial Logit-Factor Analysis Hybrid Approach

Abstract

In an era of intense competition and declining profits, airlines are increasingly focused on understanding and meeting customer needs to enhance service quality and attract more passengers. Previous studies have often treated airline choice as a function of observed variables alone. This research fills the gap by incorporating latent psychological factors using a hybrid modeling approach, providing a more holistic view of the decision-making process. In this study, an attempt was made to examine the personal and travel characteristics of passengers and their impact on airline choice at Mehrabad International Airport, Iran. To identify the structures of latent variables, exploratory factor analysis (EFA) and confirmatory factor analysis (CFA) were used, and they were then presented to a multinomial logit-factor analysis (MNL-FA) hybrid approach as observed variables for the choice model of airline and ticket price. The results of EFA indicated that the number of samples was sufficient for this analysis and FA was appropriate to identify the structure of the factor model. CFA results showed that compatible people paid more attention to airline tangibles and image in airline choice. Also, more extroverted people paid more attention to airline costs and image. Moreover, people with higher conscientiousness paid less attention to airline tangibles in airline choice and the costs associated with an airline were less influential in the choice by these people. Results also indicated that neurotic people were sensitive to airline tangibles, costs and flight planning when choosing an airline, and people who were more eager for new experiences paid more attention to tangibles, image and cost factors when choosing an airline, and were less sensitive to flight planning. MNL-FA hybrid model results showed that monthly family expenses above 250$, morning flight time, self-employment, travel with friends, number of vehicles in family ownership, housekeeper and three or more vehicles in family ownership were among the effective factors affecting the choice of the ticket price of an airline. Furthermore, the personality characteristics of compatibility and conscientiousness had positive effects on the choice of airline and ticket price, respectively.